House v. NCAA settlement approved, allowing colleges to directly pay athletes
Starting July 1, colleges will be permitted to directly pay athletes for the first time, the result of U.S. District Judge Claudia Wilken granting final approval to a multibillion dollar legal settlement Friday night.
The agreement resolves three antitrust suits against the NCAA — House, Carter and Hubbard — all of which challenged restrictions on athlete compensation. It was hashed out by attorneys for the plaintiffs and six defendants: the NCAA, SEC, Big Ten, ACC, Big 12 and Pac-12. The settlement includes almost $2.8 billion in back damages for former and current athletes (and their lawyers). It also creates a new economic model for top-tier college sports, permitting any Division I school to pay their athletes up to a total of about $20.5 million this coming academic year.
That cap will rise incrementally throughout the 10-year life of the settlement. The payments to athletes, colloquially called “revenue sharing,” will be in addition to scholarships and other benefits.
As part of the terms, the NCAA will attempt to regulate spending by deep-pocketed boosters, who have supercharged the name, image and likeness (NIL) market in football and basketball in recent years. To do that, the settlement establishes a clearinghouse, run by Deloitte and the power conferences, that will review any NIL deals that exceed $600 (and rule on whether they’re in line with “fair market value”). The idea is to weed out instances in which a booster pays a quarterback six figures for a few social media posts promoting their car dealership. Many legal experts believe that system and the school spending cap will only invite more lawsuits.
Since July 2021, when the NCAA permitted athletes to profit off their NIL, those types of agreements have driven the economy in high-major, high-revenue sports. If a football or men’s basketball team was successful, it often meant a strong booster group, known as an NIL collective, helped build the roster.
Starting next month, there will be a new truth about spending on high-level rosters: Schools will be footing a lot of the bill.
The College Sports Commission, formed by the five defendant conferences, is in charge of implementing the settlement (and thus running the new economic model). Major League Baseball executive Bryan Seeley will be the commission’s first CEO. Seeley most recently served as MLB’s executive vice president for legal and operations, which is part of Commissioner Rob Manfred’s inner circle.
The commission has already publicized a handful of key dates. NIL Go, the Deloitte-run portal that will process NIL deals that exceed $600, launches Wednesday. By June 15, schools from non-defendant conferences have to decide whether they will opt into the settlement terms, which is the only way they can pay athletes but comes with additional rules including roster limits.
On a website launched Friday night, the commission said it will “utilize NIL Go, an online portal built with assistance from Deloitte, to determine whether third-party NIL deals are made with the purpose of using a student-athlete’s NIL for a valid business purpose and do not exceed a reasonable range of compensation.”
Any deal submitted to NIL Go has three different potential paths: “Cleared” will mean it meets the commission’s requirements. “Not Cleared” will mean it fails to meet those requirements and an athlete can choose among three options. “Flagged For Additional Review” will mean the commission wants to look further at the deal, which could mean increased scrutiny on the dollar amount, the payer and so on.
If a deal is not cleared, athletes will be able to revise and resubmit; cancel the transaction; or appeal to neutral arbitration. But skeptics of the settlement say “fair market value” should be determined by free-market principles, not third-party arbiters or a consulting firm.
Another key question with the settlement — and there are many — is how Title IX law, protecting gender equity, should apply to money paid directly from schools to athletes. And because of the many layers, the approval process was not without hiccups, most notably near the end.
At a hearing in early April , Wilken, a judge from the Northern District of California, asked the lawyers from both sides to address two issues. The first was that the judge didn’t want current athletes to lose their spots because of the settlement’s new roster limits. Then she wanted more clarity on how future athletes would enter a system they had no say in crafting. The attorneys complied with the latter, pitching a five-page notice that would lay out those athletes’ right to object to the settlement terms. But with the roster limits, they didn’t budge, arguing that changing them would create a mess for schools already planning on the settlement’s approval (and that already cut athletes as a result).
So on April 23, she gave the attorneys an ultimatum : grandfather in current athletes, making it so none of them could lose a roster spot as a result of the settlement, or she would deny it. She gave them two weeks to work with a mediator and figure out a response.
The alternative to compromising? A potential trial, which the NCAA has always wanted to avoid because of how much higher the damages could get. To that end, a handful of athletes did opt out of the settlement, forgoing their share of the damages to maintain the ability to sue on similar grounds in the future. But to keep the settlement from falling apart, the attorneys amended the stance on roster limits.
Schools will be permitted, though not required, to grandfather in current athletes who have lost spots (or could lose spots) because of the settlement. None of those athletes will count toward a roster limit at their school for the rest of their careers. They could also transfer schools and not count toward the limit with a new program.
Almost a month passed, the entire industry waiting on Wilken’s next move. She then decided the terms were fair for all class members. The decision came in a 76-page opinion.
Not every Division I school will opt into the settlement and start paying its athletes. But many will, including every power-conference program, meaning they will make major adjustments this summer and fall. Some departments cut full teams in anticipation of the settlement. Multiple schools have already publicized their revenue-sharing plans, using the settlement’s back-damages formula — which will pay the most to football and men’s basketball players — to divvy money among their teams.
Georgia, for example, intends to pay at least $13.5 million to football players, about $2.7 million to men’s basketball players, about $900,000 to women’s basketball players, about $900,000 to athletes from the remaining sports and about $2.5 million into new scholarships.
It’s easy to see potential gender equity issues. But ask a dozen people in the industry about how Title IX applies to the settlement, and you might get a dozen different answers.
Beyond the House settlement, another federal case, Johnson v. NCAA , is still deliberating whether athletes are employees under the Fair Labor Standards Act. In turn, the NCAA keeps pushing for a federal bill, asking Congress for antitrust protection, a preemption of state laws and a prohibition on athletes becoming employees. Uncertainty still reigns.
Wilken, though, has made it clear that Title IX and employment are not under her purview. And throughout the opinion she issued Friday, she wrote that athletes can continue to sue for damages over the spending cap, roster limits and potential Title IX violations.
The NCAA hopes that, by settling House, Carter and Hubbard together, it will be protected from antitrust suits on similar grounds. That was not Wilken’s concern throughout this process. She only had to decide whether the settlement was fair for a large group of plaintiffs. And by ultimately approving, the 75-year-old kept shaping the arc of modern college sports, which has also been the slow and steady death of amateurism. Wilken ruled against the NCAA in the O’Bannon case in 2014, then in the Alston case in 2019. Six years later, her House decision knocked down another wall, allowing athletes to finally share in the huge amounts of revenue they generate for schools.
But just like the rulings before it, Wilken couldn’t resolve everything. That will eventually be up to other judges.
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